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Burden To Prove The Actual Physical Movement Of The Goods Is Upon The Purchasing Dealer For Availament Of Input Tax Credit : High Court Of Allahabad

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Title: M/S Malik Traders v State Of U.P. And 2 Other

Citation: WRIT TAX No. – 1237 of 2021

Decided On: 18.10.2023

Coram: Justice Rahul Divedi

Introduction:

The current Writ Tax is accepted by the Court in view of the fact that G.S.T. Tribunal is not functional in the State of Uttar Pradesh pursuant to the Gazette notification of the Central Government, dated 14.09.2023. proceedings of Section 74 of UP GST Act was initiated demanding Rs. 12,32,148/- as wrong availment of input tax credit which was confirmed by the impugned order dated 6.3.2021.

Facts:

petitioner is a registered dealer, and he is engaged in the purchase and sale of waste materials, plastic scrap, paper scrap and metal scrap. The petitioner from April 2018 to September 2019 has disclosed the turnover of Rs. 34,22,634/- on which input tax credit of Rs. 6,16,074.12/- was availed.

Thereafter a show cause notice was issued on 23.1.2019 under Section 74 of UP GST Act on the ground of wrong availment of input tax credit to which a reply was submitted by the petitioner. Later on tax liability to the tune of Rs. 6,16,074/- along with penalty of Rs. 6,16,074/- total amount Rs. 12,32,148/- was demanded from the petitioner by the order dated 4.10.2019.

It was argued that the benefit of tax credit in the G.S.T. regime is being brought with intention to avoid cascading effect and once the tax has been charged on the bill and paid by the petitioner through banking channel, the benefit of input tax credit cannot be denied.

It is submitted that petitioner has rightly discharged its tax liability by paying the tax charged on the bills raised by the selling dealer and if the selling dealer have not deposited the tax so charged from the petitioner, the selling dealer shall be penalized and not the petitioner.

On the other hand Mr. Rishi Kumar, learned A.C.S.C. has supported the impugned orders and submitted that under Section 16 of UP GST Act it has been provided that input tax credit can be availed with certain conditions stipulated therein, in the event of non-fulfilment of such conditions as enumerated therein, the benefit of input tax credit cannot be accorded.

or availment of input tax credit, the petitioner is duty bound to prove beyond any reasonable doubt and establish that actual transaction took place and merely furnishing the details of tax invoices, e-way bills, GR is not sufficient. The petitioner was required to give details i.e. vehicle number which were used for transportation of goods, payment of freight charged, acknowledgement of taking delivery of goods and payment etc.

Court’s Analysis and Judgement:

In the case of State of Karnataka Vs. M/s Ecom Gill Coffee Trading Private and in M/s Aastha Enterprises Vs. State of Bihar, it has been held that the burden to prove the actual physical movement of the goods is upon the purchasing dealer for availament of input tax credit.

According to Section 16 of U.P.G.S.T. every registered dealer can claim the benefit of input tax credit only on fulfilment of certain conditions as enumerated under the Act. And section 74 of U.P.G.S.T. it is clear that determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts empowers to issue notice that tax has not been paid or short paid or erroneously refunded or input tax credit has wrongly been availed or utilized by any reason or wilful misstatement or suppression of fact.

the petitioner has only brought on record the tax invoices, e-way bills, GR and payment through banking channel, but no such details such as payment of freight charges, acknowledgement of taking delivery of goods, toll receipts and payment thereof has been provided. Thus in the absence of these documents, the actual physical movement of goods and genuineness of transportation as well as transaction cannot be established thus the proceeding has rightly been initiated against the petitioner.

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Written By: Sushant Kumar Sharma

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Delhi High Court Dismissed the appeal and upheld the verdict of Customs, Excise and Service Tax Appellate Tribunal (‘the CESTAT’)

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Title: PR. COMMISSIONER, CENTRAL EXCISE AND CGST-DELHI SOUTH

                                                                        versus

                                    BLACKBERRY INDIA PRIVATE LIMITED

Date of Decision: 12.07.2023

+ SERTA 7/2023 and CM Nos. 34149/202 & 34150/2023

CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU

    HON’BLE MR. JUSTICE AMIT MAHAJAN

Introduction

Delhi high Court Dismissed the petition filed under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 and upheld the verdict of the CESTAT in order No.ST/A/51150/2022- in Service Tax Appeal No. 50281/2022 Blackberry India Private Limited v. Commissioner of Central Tax / Excise.

Facts of the case

The respondent (hereinafter referred to as “BlackBerry India”), which provides business auxiliary services, was registered with the Department for the purpose of paying service tax. BlackBerry India had made complaints regarding return of $8,55,34,345 worth of unused CENVAT Credit. The aforementioned Credit was built up as a result of several input services, including security, labour, sponsorship, legal consulting, etc., that BlackBerry India used to provide Business Auxiliary Services as an output service. BlackBerry India stated that its services were outsourced to a client in another country.

The Adjudicating Authority published a Show Cause Notice on January 22, 2020, proposing to reject BlackBerry India’s claim on the grounds that the services BlackBerry India provided looked to be provided in India. BlackBerry India disputed that the services rendered to BlackBerry Singapore were services as an intermediary. The adjudicating authority determined that BlackBerry India’s services were Business Auxiliary Services as defined by Section 65(19) of the Finance Act of 1994 (hereinafter referred to as “the Act”) and that they were taxable services for the time period prior to July 1, 2012. the BlackBerry solution, which includes handheld devices, accessories, software, and other relevant services, had been delivered by BlackBerry India in accordance with the provisions of the aforementioned Agreement. Additionally, BlackBerry India has carried out a number of marketing and promotion tasks as detailed in Schedule A to the Agreement. The adjudicating authority determined that the aforementioned services would come under the 2012 Place of Provision of Services Rules’ definition of intermediate services in Rule 2(f). The Adjudicating Authority said that BlackBerry India served as a middleman while BlackBerry Singapore provided services to its Indian clients.

The Adjudicating Authority determined that Rule 3 of the Export of Service Rules, 2005 applied to the benefit of export services for the time period previous to 1.07.2012, but that this did not apply to services covered under Section 65(105)(zzb) of the Act. BlackBerry India’s claim for CENVAT Credit for the time frame previous to 01.07.2012 was therefore unjustifiable. BlackBerry India filed an appeal with the Appellate Authority after being upset by the Order-in-Original dated 31.08.2020. The Appellate Authority, however, denied the aforementioned appeal since it identified no flaws in the Adjudicating Authority’s original Order-in-Original dated 31.08.2020.

BlackBerry India preferred an appeal before the learned CESTAT. The argument that BlackBerry India was neither an agent nor involved in the planning or facilitation of the delivery of the services in question was recognised by the learned CESTAT. The 2012 Place of Provision of Services Rules’ Rule 2(f) defines an intermediate, and the knowledgeable CESTAT determined that BlackBerry India did not meet this definition. The argument that BlackBerry India was neither an agent nor involved in the planning or facilitation of the delivery of the services in question was recognised by the learned CESTAT. So, according to the 2012 Place of Provision of Services Rules’ Rule 2(f), BlackBerry India was not an intermediate, according to the knowledgeable CESTAT. The learned CESTAT had examined the Agreement and had concluded in favour of the Blackberry India and over-turned the decision of the appellate authority.

Analysis of the court

The hon’ble court held that, an intermediary only arranges or facilitates the provision of services, as is clear from the word. In this instance, the services provided by BlackBerry India to BlackBerry Singapore pursuant to the Agreement were not those that enabled the use of services from another vendor. BlackBerry India was expected to deliver the promotional and marketing services, technical marketing help, and other associated services as an independent service provider. These services were not arranged or made possible by BlackBerry India or any other vendor.

It is also pertinent to make reference to the Central Board of Indirect Taxes and Customs’ circular from the 20.09.2021. Although the aforementioned Circular was issued in relation to the Goods and Services Tax, it notes that the definition of “intermediary” in Section 2(13) of the Integrated Goods and Services Tax Act, 2017, was taken from Rule 2(f) of the Place of Provision of Services Rules, 2012, and provides an explanation of the concept in question.

The Circular makes it clear that BlackBerry India cannot be regarded as an intermediary with regard to the services it provides under the Agreement. The Court had also considered a similar question albeit in the context of refund of input tax credit under the Integrated Goods and Services Tax Act, 2017 in M/s Ernst and Young Limited v. Additional Commissioner, CGST Appeals-II, Delhi and Anr.: W.P.(C) 8600/2022, decided on 23.03.2023 and M/s Ohmi Industries Asia Private Limited v. Assistant Commissioner, CGST: W.P.(C) 6838/2022, decided on 29.03.2023. In our opinion, the aforementioned rulings completely address the dispute that the Revenue is attempting to bring up in this appeal.

The Adjudicating Authority was clearly wrong to conclude that the services covered by Section 165(105)(zzb) of the Act were not included in the definition of export of taxable services under Rule 3(1) of the Export of Service Rules, 2005. The learned CESTAT has correctly decided that all services are under the purview of Export of Taxable Services, with the exception of those explicitly stated in Rule 3(1) of the Export of Services Rules, 2005. Clearly, the adjudicating authority misinterpreted the aforementioned rule.

In light of the foregoing, we determine that the current petition does not raise any significant legal issues. Therefore, the current appeal is denied.

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Written By – Shreyanshu Gupta

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